PR
MANILA, PHILIPPINES, 9th April 2020 – Manila Electric Company (MERALCO) announced today a lower generation charge for the month of April, mainly brought about by the Meralco claim of Force Majeure during the Enhanced Community Quarantine (ECQ).
From P4.6632 per kWh last month, generation charge for April decreased by P0.0247 per kWh to P4.6385 per kWh due to the reduction in fixed charges resulting from the Force Majeure claim of Meralco allowed in its ERC-approved Power Supply Agreements (PSAs). This month’s generation charge is significantly lower than the April 2019 generation rate of P5.6322 per kWh.
Because of the significant reduction in power demand in its service area during the Enhanced Community Quarantine (ECQ) period, Meralco invoked the Force Majeure provision in its PSAs for the duration of the lockdown, reducing fixed charges for generation capacity that was not consumed. Without the Force Majeure claim, the generation charge would have increased by P0.0259 per kWh from last month’s rate.
Charges from the Wholesale Electricity Spot Market (WESM) decreased by P0.9429 per kWh, driven by improved supply conditions in the Luzon grid. Average capacity on outage decreased in March with the return to normal operations of plants that were on scheduled maintenance last month. Meanwhile, demand for power in Luzon increased in March due to higher consumption before the start of the ECQ. The share of WESM to MERALCO’s supply needs was 11%.
The cost of power from Independent Power Producers (IPPs) also decreased by P0.0965 per kWh due to higher average plant dispatch and Peso appreciation, while the increase in PSA charges was tempered by Meralco’s Force Majeure claim, lowering it to only P0.1696 per kWh. IPPs and PSAs accounted for 38% and 51% of total supply, respectively.
Normalization of Universal Charge
However, due to the normalization of the Universal Charge rate, April registered a slight upward adjustment of overall power rates, as the overall rate for a typical household rose by P0.1050 per kWh, from last month’s P8.8901 per kWh to P8.9951 per kWh this April. This is equivalent to a P21 upward movement in the total bill of residential customers consuming 200 kWh.
With a total net electricity rate decrease of around P0.87 per kWh this year so far, this month’s rate is still significantly lower than that of last April 2019, which was P10.5594 per kWh.
The slight adjustment this month is not due to an increase in the cost of producing and delivering electricity, but mainly due to the Universal Charge returning to its normal level following a one-time refund of P0.1453 per kWh in Universal Charge-NPC Stranded Contract Costs (UC-SCC). Meralco’s invocation of the Force Majeure provision, however, helped temper the Universal Charge increase, reducing fixed charges for generation capacity that was not consumed.
The increase in Universal Charge resulted from the Energy Regulatory Commission (ERC) directing Meralco last month to implement a P0.1453 per kWh rate reversal in UC-SCC representing collections in excess of the amount due to Power Sector Assets and Liabilities Management Corporation (PSALM). With the one-time refund completed, Universal Charge normalized this April, with an increase of the same amount implemented this month as an effect. The existing Universal Charge remitted the government is used for electrification in off-grid areas, NPC’s financial obligations in excess of privatization proceeds, and watershed rehabilitation and management.
ERC Suspends FIT-All Collection
The increase in Universal Charge was tempered by the P0.0495 per kWh decrease in the Feed-In-Tariff Allowance (FIT-All) for April, as the ERC ordered a one-month deferral of the FIT-All in consideration of the current ECQ.
Universal Charges cover Missionary Electrification (UC-ME), NPC Stranded Debt (UC-SD), and Environmental Charges (UC-EC) and are remitted to state-owned Power Sector Assets and Liabilities Management Corp. (PSALM). UC-ME funds the electrification of remote and unviable areas that are not connected to the transmission system, while UC-SD covers NPC’s financial obligations that are not covered by privatization proceeds. UC-EC are used for watershed rehabilitation and management.
Meanwhile, transmission charge registered a slight increase this month by P0.0002 per kWh due to higher ancillary charges, while taxes and other charges registered a net increase of P0.1295 per kWh, mainly due to the normalization of Universal Charge.
Meralco’s distribution, supply, and metering charges, meanwhile, have remained unchanged for 57 months, after these registered reductions in July 2015. Meralco reiterated that it does not earn from the pass-through charges, such as the generation and transmission charges. Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the NGCP. Taxes and other public policy
